NEC Electronics and Renesas to Integrate Business Operations Establishment of the World’S Third Largest Semiconductor Company

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NEC Electronics and Renesas to Integrate Business Operations Establishment of the World’S Third Largest Semiconductor Company NEC Electronics and Renesas to Integrate Business Operations Establishment of the World’s Third Largest Semiconductor Company KAWASAKI, Japan, TOKYO, Japan, April 27, 2009 -- NEC Electronics Corporation (NEC Electronics; TSE: 6723), Renesas Technology Corp. (Renesas), NEC Corporation (NEC; TSE: 6701), Hitachi, Ltd. (Hitachi; TSE: 6501 / NYSE: HIT), and Mitsubishi Electric Corporation (Mitsubishi Electric; TSE: 6503) today agreed to enter into negotiations to integrate business operations at NEC Electronics and Renesas. 1. Background and goals of business integration NEC Electronics was established in 2002, separating from NEC, and Renesas was established in 2003, integrating semiconductor units at Hitachi and Mitsubishi Electric. Both as leading semiconductor companies, NEC Electronics and Renesas provide a wide variety of semiconductor solutions, primarily specializing in microcontroller units (MCUs). In light of fierce global competition in the semiconductor market, NEC Electronics and Renesas have agreed to explore the possibility of business integration in order to further strengthen their business foundations and technological assets while increasing corporate value through enhanced customer satisfaction. By integrating the world’s two largest MCU suppliers (*1), the new company will provide one of the most competitive MCU product lineups throughout the world. NEC Electronics and Renesas both focus on the fast-growing field of system-on-chip (SoCs) products. NEC Electronics is a leading producer of SoCs for digital consumer electronics, while Renesas is a well established manufacturer of SoCs for mobile phones and automotive applications. By reinforcing the companies’ respective strengths and development resources the new company will provide globally competitive SoC products. In terms of the discrete semiconductor business, both companies will define strategies to enhance the competitiveness of analog and discrete products that generate synergies with MCUs. The new integrated company will have three major product groups, MCUs, SoCs, and discrete products, and will become the world’s third-largest semiconductor business. The new company will select and focus on the development of projects covering a diverse range of fields and will expand its comprehensive lineup of globally competitive products. In order to address the ongoing challenges of the current economic downturn, NEC Electronics and Renesas will each execute structural reform plans in order to strengthen their business frameworks. Upon completion of these structural reforms, the two companies will integrate their operations to achieve synergies and boost profitability. This integration will result in the establishment of a powerful new semiconductor company that is capable of consistently achieving high earnings and maintaining the ability to withstand changing market conditions. 2. Corporate structure following integration The preconditions for holding future negotiations are to integrate business operations on April 1, 2010, and to maintain public listing for the new company. To ensure fairness and equitability, the ownership ratio of the integrated company will be decided and announced before the conclusion of the integration contract through negotiations between NEC Electronics and Renesas, based on scheduled due diligence. The new company will announce the company name, the location of its headquarters, the corporate representative, the board members, capitalization, total assets, and financial forecasts following the integration. 3. Schedule moving forward NEC Electronics and Renesas plan to sign an agreement at the end of July, 2009 to integrate their business operations. The dates and details of the extraordinary general meetings of shareholders for NEC Electronics and Renesas to consider approval of the integration are to be announced following the signing of the agreement. Implementation of the planned business integration is conditional upon authorization of the integration by the relevant government agencies. 4. Outline of NEC Electronics and Renesas Technology Company (1) NEC Electronics Corporation Renesas Technology Corp. Name Development, design, manufacture, sale, and servicing of SoC products R&D, manufacture, sale, and Major such as MCUs, logic devices, and (2) servicing of semiconductor Operations analog devices; discrete devices mainly on system LSIs semiconductor products; and memory products such as SRAM (3) Established November 1, 2002 April 1, 2003 Kawasaki City, (4) Headquarters Chiyoda-ku, Tokyo, Japan Kanagawa Prefecture, Japan Katsuhiro Tsukamoto, Toshio Nakajima, Representative Director, Chairman (5) Representative President and CEO Yasushi Akao, Representative Director, President ¥85.955 billion ¥77 billion (6) Capital (As of March 31, 2009) (As of March 31, 2009) Number of 123.5 million 5.54 million (7) Stocks Issued (As of March 31, 2009) (As of March 31, 2009) ¥224.817 billion (Consolidated, ¥333.052 billion (Consolidated, (8) Net Assets As of Sept. 30, 2008) As of Sept. 30, 2008) ¥622.047 billion (Consolidated, ¥840.343 billion (Consolidated, (9) Total Assets As of Sept. 30, 2008) As of Sept. 30, 2008) (10) End of FY March 31 March 31 22,500 (Consolidated, 25,000 (Consolidated, (11) Employees As of March 31, 2009) As of March 31, 2009) Electronic equipment Electronic equipment manufacturers, manufacturers, Major Semiconductor production Semiconductor production (12) Customers equipment manufacturers, equipment manufacturers, Semiconductor materials Semiconductor materials manufacturers manufacturers NEC Corporation: 65.02% Major Japan Trustee Services Bank, Ltd. Stockholders (Trust Account from The Hitachi, Ltd.: 55% (13) and Sumitomo Trust and Banking Co., Mitsubishi Electric Corporation: 45% Ownership Ltd., for retirement benefit Trust Ratios Account of NEC Corporation): 5.02% The Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking (14) Main Banks Ltd., Corporation Mizuho Corporate Bank, Ltd. Renesas owns 100 shares of stock in NEC Capital Ties Electronics. Personal Ties No relevant items Present NEC Electronics outsources some production Relationship Business processes to Renesas Northern Japan (15) between Relationship Semiconductor, Inc., a consolidated subsidiary of Corporate Renesas. Parties Relevant Circumstances of No relevant items Related Parties Business (16) Performance (Unit: ¥1 million) NEC Electronics Renesas (Consolidated, US-GAAP) (Consolidated, Japan-GAAP) March 31, March 31, March March 31, March 31, March 31, Fiscal Year Ending 2006 2007 31, 2008 2006 2007 2008 Net Sales 645,963 692,280 687,745 906,038 952,590 950,519 Operating Income (35,689) (28,557) 5,094 13,124 23,482 43,592 (Loss) Ordinary Income — — — 2,194 15,722 28,694 (Loss) Income (Loss) before (42,386) (35,375) (3,252) (9,835) 13,275 28,171 Income Taxes Net Profit (Loss) (98,198) (41,500) (15,995) (2,470) 8,738 9,468 Net Income (Loss) (795.13) (336.04) (129.52) (493.92) 1,747.52 1,893.64 Per Share (¥) Dividend Per Share 0 0 0 — — — (¥) Net Assets Per Share 2,495.98 2,146.32 1,839.20 63,354.90 65,735.31 66,623.71 (¥) Note 1: NEC Electronics’ consolidated financial information is in accordance with U.S. GAAP. However, the figure for operating income shown above represents net sales minus the cost of sales, research and development expenses, and selling, general and administrative expenses. Note 2: The consolidated financial results of Renesas are not subject to audits based on the Financial Instruments and Exchange Law. Note 3: Both companies will announce consolidated results for the fiscal year ended March 2009 after the financial announcements for FY 09/3 Q4. Notes:(*1) Source: Gartner "Semiconductor Applications Worldwide Annual Market Share: Database" 2 April 2009 About NEC Electronics NEC Electronics Corporation (TSE: 6723) specializes in semiconductor products encompassing advanced technology solutions for the high-end computing and broadband networking markets, system solutions for the mobile handset, PC peripheral, automotive and digital consumer markets, and multi-market solutions for a wide range of customer applications. NEC Electronics Corporation has subsidiaries worldwide including NEC Electronics America, Inc. and NEC Electronics (Europe) GmbH. For additional information about NEC Electronics worldwide, visit www.necel.com. About Renesas Technology Corp. Renesas Technology Corp. is one of the world's leading semiconductor system solutions providers for mobile, automotive and PC/AV (Audio Visual) markets and the world's No.1 supplier of microcontrollers. It is also a leading provider of LCD Driver ICs, Smart Card microcontrollers, RF-ICs, High Power Amplifiers, Mixed Signal ICs, System-on-Chip (SoC), System-in-Package (SiP) and more. Established in 2003 as a joint venture between Hitachi, Ltd. (TSE:6501, NYSE:HIT) and Mitsubishi Electric Corporation (TSE:6503), Renesas Technology achieved consolidated revenue of 951billion JPY in FY2007 (end of March 2008). Renesas Technology is based in Tokyo, Japan and has a global network of manufacturing, design and sales operations in 17 countries with 25,000 employees worldwide. For further information, please visit http://www.renesas.com/ About NEC Corporation NEC Corporation is one of the world's leading providers of Internet, broadband network and enterprise business solutions dedicated to meeting the specialized needs of a diversified global base of customers. NEC delivers tailored solutions in the key fields of computer, networking and electron devices, by integrating its technical
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